Court File and Parties

COURT FILE NO.: C-391-15 DATE: 2016-09-16 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FADIL USANOVIC, Plaintiff AND: LA CAPITALE LIFE INSURANCE COMPANY also carrying on business as LA CAPITALE FINANCIAL SECURITY INSURANCE COMPANY, Defendant

BEFORE: The Honourable Mr. Justice D.A. Broad

COUNSEL: Daniel Fife, for the Plaintiff Vincent Genova, for the Defendant

Costs Endorsement

[1] The parties have not been able to settle the issue of costs and have now delivered their submissions in that respect.

[2] The defendant, who was successful on its motion for summary judgment dismissing the plaintiff’s action, seeks costs on a partial indemnity basis in the total amount of $51,019.50. This amount is comprised of fees in the sum of $45,150.00, HST on the fees in the sum of $5,869.50, disbursements in the sum of $6,200.52 and applicable HST on the disbursements in the sum of $687.41.

Positions of the parties

[3] The plaintiff’s position with the respect to the defendant’s claim for costs is as follows:

(a) the main issue on the motion, namely, whether an insurer is required, considering its duty of good faith to its insured, to advise the insured of the limitation period when it denies a claim, was novel and important to the public at large as well as to the insurance industry. Accordingly, the court should exercise its discretion and make no award as to costs;

(b) the costs sought by the defendant are excessive on the basis that the amount of time claimed for review of a demand for particulars and research for the summary judgment motion and drafting the Factum are excessive, Mr. Genova’s claimed partial indemnity rate exceeds 60% of his actual rate, and Ms. Barbato participated in the motion as a witness, not as counsel;

(c) the plaintiff is impecunious and the court should exercise its discretion to reduce the claim for costs as a result;

(d) in light of these factors, if costs are to be awarded they should be reduced to no more than $5,000 to $10,000.

[4] The defendant responds to the plaintiff’s position as follows:

(a) the issue respecting the existence of an obligation on insurers to advise their insureds of limitation periods in denying benefits is not novel, but has been the subject of a number of previous cases which have determined that the imposition of any such requirement is better left to the legislature;

(b) the defendant was required to extinguish a meritless position to avoid an improper result that would need to be corrected by a higher court. In addition the defendant was obliged to prepare to counter the plaintiff’s pleaded position with respect to a rolling limitation period which was not ultimately pursued by the plaintiff;

(c) Ms. Barbato’s attendance and assistance was required at the motion, just as Mr. Fife required the assistance of Ms. Cameron who, although gowned, did not argue any part of the motion; and

(d) There is no evidence before the court that the plaintiff is impecunious. An award of costs should not be based on the capacity of the losing party to pay costs, as this would encourage impecunious plaintiffs to pursue avoidable claims with no personal risk.

Guiding Principles re Costs Generally

[5] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid."

[6] The factors to be considered by the court, in the exercise of its discretion on costs, are set forth in subrule 57.01(1), as follows:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, various factors, including:

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[7] The usual rule in civil litigation is that costs follow the event and that rule should not be departed from except for very good reasons (see Gonawati v. Teitsson, [2002] CarswellOnt 1007 (Ont. C.A.) and Macfie v. Cater, [1920] O.J. No. 71 (H.C.J.) at para 28).

[8] The Court of Appeal has observed that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behavior by litigants (see Fong v. Chan at para. 24).

[9] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario), [2004] O.J. No. 2634 (Ont. C.A.) at para. 26 and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, [2005] O.J. No. 160 (Ont. C.A.)).

[10] Armstrong, J.A. in Boucher cast the overriding principle of reasonableness as an access to justice issue. At para 37 he stated as follows:

The failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice. The costs system is incorporated into the Rules of Civil Procedure, which exist to facilitate access to justice. There are obviously cases where the prospect of an award of costs against the losing party will operate as a reality check for the litigant and assist in discouraging frivolous or unnecessary litigation. However, in my view, the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.

Analysis

[11] I am not satisfied that the nature of the issue raised by the plaintiff on the motion was such that no award of costs should be made on the basis of novelty. As the Divisional Court observed in Groia v. The Law Society of Upper Canada, 2015 ONSC 1680 (Div. Ct.) at para. 4, there is no rule that the first case to raise a particular issue should not attract a costs award. Although there may be a public benefit to having the court clarify a legal issue, that does not mean that no costs should be awarded in all such cases.

[12] I would not characterize the issue advanced by the plaintiff as involving an attempt to right “some legislative or industry wrong that an insurer seeks to unfairly utilize” as expressed by Glithero, J. in Lauzon v. Axa Insurance (Canada), 2013 ONSC 2676 (S.C.J.) at para. 11 and as urged by the plaintiff. The existence of a statutory limitation period can hardly be called a “wrong” and reliance on it by the defendant cannot be regarded as “unfair”. The fact that an insurer, as with any other contracting party, is not obliged to advise the other contracting party of a limitation period similarly cannot be characterized as a “wrong”.

[13] I therefore find that the usual rule that costs should follow the event should apply in the present case and that the defendant is therefore entitled to an award of costs on a partial indemnity basis.

[14] I would however, reduce the amount of the defendant’s claim for costs, keeping in mind the principles referred to above respecting reasonableness and proportionality, as well as the fundamental objective of access to justice identified by Armstrong, J.A. in Boucher.

[15] It is noted that fees are claimed under the heading “initial correspondence” for attendances which pre-dated the commencement of the litigation including “review file and draft summary and opinion letter” and “draft denial letter”. Had the action not been commenced there is no suggestion that the plaintiff would be responsible to pay the defendant’s legal costs for these items, which are simply part of the defendant’s normal business. I would reduce the defendant’s clam by $885 for these items.

[16] I would also reduce the overall time claimed for “discussion and research,” “research memo for limitation periods” and “legal research and drafting Factum for motion” under the headings “Preparation for Summary Judgment Motion” and “Factum and Reply Factum.” The total amount under these heading is $27,886.50, comprising 163.3 hours of counsel and student time. This amount should be reduced by 40% or $11,154.60.

[17] The revised fee amount is $33,110.40. The plaintiff takes no issue with the defendant’s claim for disbursements.

[18] As confirmed by Rady, J. in Berg v. Loblaw Properties Limited, 2013 ONSC 4803 (S.C.J.) at para. 5 there is authority for the proposition that the plaintiff’s means are a relevant consideration in the court’s discretion, not to eliminate costs but to reduce them to avoid hardship.

[19] I am prepared to draw the reasonable inference that the plaintiff is impecunious. In the context of a determination of costs the level of proof required to demonstrate impecuniosity should not be placed unrealistically high. The plaintiff’s income tax returns for 2013 and 2014 included in his Affidavit of Documents indicated an income of $10,200 and $7,935 in those years respectively. A reduction of the costs is necessary in order to avoid undue hardship to the plaintiff.

Disposition

[20] In the exercise of my discretion I would fix the total partial indemnity costs of the defendant at $23,750.00, being a rounded figure reflective of $15,000 for fees, HST thereon together with the total amount claimed by the defendant for disbursements and applicable HST thereon in the sum of $6,887.93.

[21] The above amount is payable by the plaintiff to the defendant within 30 days hereof in accordance with r. 57.03(1)(a).

D.A. Broad J. Date: September 16, 2016